The IRA Charitable Rollover Provision offers individuals who have reached the age of 70Ĺ the opportunity to donate up to $100,000 directly from their Individual Retirement Account (IRA), to charitable organizations as a tax exempt distribution. This provision is set to expire again in 2015 so stay tuned for updates.
The Pension Protection Act, IRA Charitable Rollover
In order to qualify, these contributions must be dispersed directly to a public charity, and they must be made from traditional or Roth IRAs.
Charitable rollover donors are NOT allowed to receive goods or services in return for their contributions, and must obtain written acknowledgment from the organization.
While the independent Sector continues to support the permanent extension of all charitable tax extenders, including the IRA charitable rollover, the provisions have been allowed to lapse, reducing charitable giving and increasing tax burden.
The IRA Charitable Rollover Enactment
Ever since the charitable rollover provision was first enacted, Americans have contributed millions of dollars to nonprofit organizations that continue to benefit Americans every day including:
- Social service programs
- Religious organizations
- Arts and cultural institutions
- Health care providers
- Schools, and more
The IRA Charitable Rollover allows taxpayers to make donations directly to charitable organizations from their IRAs without having to count those funds as part of their Adjusted Gross Income (AGI) and, consequently, without having to pay taxes on the donated amount of funds dispersed.
It is important to note that the annual cap on these donations only allow the tax deduction on funds donated up to that limit. As of now a donorís total combined tax free charitable IRA rollover contributions cannot exceed $100,000 in any one year.
Eligible Charitable Organizations
Charitable contributions coming from an IRA distribution must go directly to eligible public charities that are not a supporting organization.
Contributions to donor-advised funds and private foundations, do not qualify for tax-free IRA rollover contributions, except in limited circumstances.
Distributions must be made directly from the IRA trustee, payable to the public charity.
Charitable donations from 403(b) plans, 401(k) plans, pension plans, and other retirement plans do not qualify for the tax-free treatment. Eligible Retirement Accounts. Distributions are only allowed to be made from Traditional Individual Retirement Accounts or Roth IRAs.
Take Note: You Must Get Written Acknowledgement from the Charity you are Donating To.
In order for donors to benefit from the tax-free treatment, they must obtain written substantiation of each IRA rollover contribution made to each recipient charity.